Amazon Seller Services losses rise 31%

The company’s advertising expenses, however, saw a dip in fiscal year 2017.

BENGALURU: Amazon Seller Services, the main marketplace business of Amazon in India, saw its losses grow by 31% in FY17, reaching Rs 4,830 crore from Rs 3,679 crore the year before. The rate of growth of losses was much lower than the 100% increase in losses in fiscal year 2016 from the preceding financial year.

Revenues of Amazon’s main India unit in the fiscal year ending March 2017 grew by 43% to Rs 3,256 crore, again at a slower pace compared to the 123% jump to Rs 2,275 crore in the year ending March 2016, the company’s filings sourced from Tofler show.

Amazon India saw its expenses grow in delivery charges, which rose up to Rs 2,549 crore from Rs 1,510 crore, while employee benefits also increased to Rs 781 crore from Rs 500 crore the year before. There was also an increase in expenses in areas such as payment processor fees and reimbursement of damages to fulfilled inventories, as per the filings.

The company’s advertising expenses, however, saw a dip in fiscal year 2017, falling to Rs 1,820 crore from Rs 2,163 crore in FY16, in a year when its main rival Flipkart had struggled to raise new funds and maintain leadership. “The company has invested in establishing infrastructure, opening new fulfilment centres and technology advancement due to which (the) company’s loss increased to Rs 48,306 million,” Amazon said in the filing. “The company is also investing on launching new products and new services for its customer and its sellers,” it mentioned.

Cloudtail, Amazon’s joint venture with Infosys cofounder Narayana Murthy’s Catamaran, has registered a profit of Rs 1.5 crore after tax, while its revenues grew to Rs 5,700 crore in FY17. Cloudtail is one of the key sellers on Amazon India.
Following regulations in 2016 that mandated a single vendor to account for not more than 25% of sales on an online marketplace that has overseas investment, Amazon lowered its dependence on CloudTail, and also set up another joint venture Appario with the Patni group last year.

Cloudtail’s revenue growth had dropped 24% in 2016-17 from about 300% in the year before, indicating Amazon’s change in strategy from focusing on Cloudtail as the main seller.

Besides sellers’ commissions, Amazon India also earns from its parent company through advertising fees, other related-party transactions, and royalty for selling Amazon brands such as Kindle.

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